The U.S. Court of Appeals for the Sixth Circuit became the first court of appeals to hold that under 28 U.S.C. §1782, the federal statute authorizing discovery in an aid of a foreign proceeding, a district court can order discovery in aid of a private commercial arbitration seated abroad. The Sixth Circuit's decision in Abdul Latif Jameel Transportation Co. v. FedEx, __ F.3d ___, 2019 U.S. App. LEXIS 28348 (6th Cir. Sept. 19, 2019), is in direct conflict with prior decisions from the Second and Fifth Circuits. The Sixth Circuit's decision likely portends an increase in applications pursuant to §1782 seeking discovery in private foreign commercial arbitrations and raises the prospect of the Supreme Court having to resolve the circuit split.

The State of Law Prior to 'Abdul Latif'. Section 1782 imposes three requirements that must be established before a federal district court may order discovery in aid of a foreign proceeding: (1) the party from whom discovery is sought must "reside[]" or be "found" within the district; (2) the discovery is for use before a "foreign or international tribunal"; and (3) the applicant seeking discovery must be an "interested person." If the applicant seeking discovery satisfies the three statutory factors, the court may order discovery after evaluating certain discretionary factors identified by the Supreme Court in Intel v. Advanced Micro Devices, 542 U.S. 241, 264-65 (2004).

The Sixth Circuit's Abdul Latif decision is at odds with earlier decisions by the Second and Fifth Circuits that held that §1782 does not include private arbitral tribunals: National Broadcasting Co. v. Bear Stearns & Co., 165 F.3d 184 (2d Cir. 1999) and Republic of Kazakhstan v. Biedermann International, 168 F.3d 880, 883 (5th Cir. 1999). The Second Circuit in NBC noted that while the statutory phrase "'foreign or international tribuals' does not unambiguously exclude private arbitration panels," the legislative history evidenced Congress's intent "to cover governmental or intergovernmental arbitral tribunals and conventional courts and other state-sponsored adjudicatory bodies." 165 F.3d at 188, 190.

Both NBC and Biedermann predate the Supreme Court's Intel decision. Following Intel, courts have split on whether Intel resolved the issue of whether §1782 applies to private international arbitration. While Intel did not concern a discovery request in connection with private arbitral proceedings or mention either NBC or Biedermann, the Supreme Court cited a law review article by Prof. Hans Smit, a primary drafter of §1782, in which he stated that "the term 'tribunal'… includes investigating magistrates, administrative and arbitral tribunals … ." Intel, 542 U.S. at 258. The Fifth Circuit has reaffirmed that Biedermann remains good law following Intel and bars using §1782 to obtain discovery in connection with private commercial arbitration. See El Paso v. La Comision Ejecutiva Hidroelectrica Del Rio Lamapa, 341 F. App'x 31, 33-34 (5th Cir. 2009). By contrast, some district courts in the Second Circuit have interpreted Intel as implying that §1782 includes private arbitral tribunals (such that NBC is no longer good law). See In re Application of the Children's Inv. Fund. Found. (UK), 363 F. Supp. 3d 361, 369-70 (S.D.N.Y. 2019); In re Kleimar N.V., 220 F. Supp. 3d 517, 521-22 (S.D.N.Y. 2016). However, other courts in the Second Circuit have concluded that NBC survived Intel and have thus refused to extend §1782 to private arbitral proceedings. In re Petrobras Sec. Litig., 2019 U.S. Dist. LEXIS 125969, at *30-32 (S.D.N.Y. July 29, 2019); In re Hanwei Guo, 2019 U.S. Dist. LEXIS 29572, at *3-5 (S.D.N.Y. Feb. 25, 2019).

Sixth Circuit Creates a Circuit Split by Authorizing Discovery in Private Arbitration. After the commencement of a private arbitration under the rules of the Dubai International Financial Centre-London Court of International Arbitration, Abdul Latif filed a §1782 application seeking discovery from FedEx, a nonparty to the contract and arbitration that Abdul Latif claimed was heavily involved with the contract termination. The district court denied the application on the ground that the private commercial arbitration fell outside the scope of §1782's requirement of a "foreign or international tribunal." Abdul Latif, 2019 U.S. App. LEXIS 283848, at *9. The Sixth Circuit reversed, holding that "the meaning of that text based on common definitions and usage of the language at issue, as well as the statutory context and history of §1782(a) … permits discovery for use in the private commercial arbitration at issue." Id. at *3.

After consulting dictionaries, legal writing, and statutory sources, the panel concluded that "[t]hese sources show that American lawyers and judges have long understood, and still use, the word 'tribunal' to encompass privately contracted-for arbitral bodies with the power to bind the contracting parties." Id. at *22-23. The Sixth Circuit rejected the argument that permitting discovery in connection with foreign commercial private arbitration would be incongruous because it would afford a foreign party greater discovery rights than a party would have under the Federal Arbitration Act. Id. at*39. The Sixth Circuit did not agree that "simply because similar discovery devices may not be available in domestic private arbitration, [§1782(a)] categorically does not apply to foreign or international private arbitration." Id. at *41-42. The Sixth Court specifically noted that the Supreme Court rejected these types of argument in Intel. Id. at *39.  Similarly, the Sixth Circuit rejected FedEx's argument that permitting discovery under §1782 would undermine the "efficiency considerations" of arbitration because courts maintain discretion over discovery under §1782 and addressing these policy concerns was "a task for Congress, not the courts." Id. at *38-39, *42-43. The Sixth Circuit remanded the case to the district court to conduct the multifactor analysis under the Supreme Court's decision in Intel. Id. at *47.

The Sixth Circuit expressly acknowledged that its decision was "at odds" with the Second and Fifth Circuit. Id. at *32. The Sixth Circuit faulted those courts for turning to

"legislative history too early in the interpretation process." Id. at *33.  Moreover, the Sixth Circuit indicated that its own review showed that there was nothing in the legislative history to affirmatively indicate that §1782 did not encompass private commercial arbitration. Id. at *34-38.

Conclusions

The Sixth Circuit's decision increases the likelihood that the Supreme Court will address the issue of whether private commercial arbitrations seated abroad fall within the scope of §1782. Until that time, the Sixth Circuit could become the preferred forum for seeking discovery in aid of private commercial arbitration. However, such discovery will only be able to the extent the target of the discovery "resides" or is "found" in the states comprising the Sixth Circuit.

This development will understandably stoke concerns about U.S.-style discovery further encroaching upon international commercial arbitration. However, as the Sixth Circuit recognized, federal courts have discretion whether to deny or modify discovery requests under Intel even if the statutory requirements of §1782 are satisfied.

In exercising their discretion under Intel, there are features of international commercial arbitration that should guide district courts in denying any §1782 request that is not appropriately tailored. Indeed, the Sixth Circuit acknowledged that a court's discretion presumably "extends to consideration of any agreements between the contracting parties regarding the availability and scope of discovery in arbitration." Abdul Latif, 2019 U.S. App. LEXIS 28348, at *44. Thus, parties may wish to include contractual provisions that address the availability and/or scope of discovery that can be sought pursuant to §1782. Moreover, a district court should also examine the arbitration agreement that gave rise to the arbitral proceedings, as such agreements will typically indicate that the parties generally contracted for rules and procedures with more limited discovery than that contemplated by the Federal Rules of Civil Procedure. Cf. Commercial Solvents v. La. Liquid Fertilizer Co., 20 F.R.D. 359, 361 (S.D.N.Y. 1957) (denying request for discovery pursuant to the Federal Rules of Civil Procedure in connection with arbitral proceedings because by submitting to arbitration, "respondent chose to avail itself of procedures peculiar to the arbitral process rather than those used in judicial determinations.").

The other major bulwark against excessive §1782 discovery requests in connection with international commercial arbitration is the arbitral tribunal itself. While §1782 permits a party to seek discovery without the imprimatur of the arbitral tribunal, in practice the tribunal will likely have significant influence, if not total control, over the scope and methods of discovery. See, e.g., London Court of International Arbitration Rules, Art. 22.1(v) (providing that "the Arbitral Tribunal shall have the power … as the Arbitral Tribunal may decide … to order any party to produce [documents] which the Arbitral Tribunal decides to be relevant."). Ultimately, a party is far less likely to seek court assistance under §1782 if the evidence it obtains will not be received and considered by the arbitral tribunal.

Justin J. Santolli is a litigation special counsel at Fried, Frank, Harris, Shriver & Jacobson in New York. R. David Gallo is a litigation associate at the firm.